Many scientists, economists, environmentalists and business leaders agree that a cap on carbon emissions is the best way to cure our addiction to oil. But, quickly and vividly explaining how a cap will solve our energy problems is a challenge.

We need your help conveying this concept to the American people in a clear, brief, convincing and memorable way to stick in the public’s consciousness-like the well-known shot of an egg frying that depicted “your-brain-on-drugs.”

Actually, I don’t really know any scientists, economists, environmentalists, and business leaders who think a carbon cap is the best way to cure our addiction to oil. It is possible I hang out with the wrong crowd. But I think it is more likely that they all understand something I’ve written about on my blog many times — a carbon price is a lousy way to drive oil savings.

That means a price of $400 a metric ton of carbon (whether achieved through a tax or a cap & trade system) would increase the price of gasoline a mere $1 a gallon. How much efficiency would that drive? Not bloody much! How do we know? How much efficiency did going from $2 a gallon to $3 a gallon drive? [Hint: Not bloody much.] Second, I was just in England, and they’re paying over $8 a gallon — how much more efficient are their cars than ours? [Hint: As of 2002, the average fuel economy of European Union vehicles was 37 miles per gallon, just a tad more than what the new energy bill requires, and their taxes are typically some $2 a gallon above ours.]

Charging a price for CO2 emissions would raise the price of gasoline, but that increase–and the resulting decrease in vehicle emissions–would be relatively small. Most of the reduction in CO2 emissions would occur in other sectors.

The initial impact on vehicle emissions would be particularly small: People could drive less and at slower speeds, and some could switch to public transit, but in the short run they would have few other alternatives. Over time, consumers could respond to higher gasoline prices by buying more fuel-efficient vehicles and reducing their commuting distance when an opportunity arises. Substantial increases in gasoline prices in recent years have triggered measurable responses of both types. But a CO2 price high enough to induce sizable reductions from other sources of emissions would have only a small effect on vehicle emissions of CO2. Recent changes to the automobile fuel economy standards–greatly increasing their stringency–will result in a substantial decline in vehicle emissions whether gasoline prices increase or not.

Remember, the 2007 “Energy Independence and Security Act,” requires new car fuel economy standards in 2020 to be at least 35 miles per gallon. As CBO notes,

… gasoline prices might have to rise above $6.50 per gallon–for example, from a CO2 price that added $2.00 or $2.50 per gallon to gasoline prices–for the average fuel economy of new vehicles in the United States to approach the 35 mpg that the new CAFE standards will require. But the CO2 prices contemplated in current U.S. climate legislation and in prominent international policy analyses would add much less than $2.00 to the price of gasoline. Thus, such pricing, by itself, would probably not increase average fuel economy beyond what the CAFE standards will require.

The bottom line is that a carbon cap is utterly irrelevant to curing our oil addiction. I’ll repeat something I’ve said many times: No country has successfully introduced a mass-market alternative fuel vehicle without the help of major government incentives and mandates.

If you want to cure our oil addiction, while substantially reducing greenhouse gas emissions, you must replace the vast majority of the vehicle fleet with superefficient vehicles, plug-in hybrids, and pure electric cars while replacing essentially all of the grid with zero-carbon electricity (see “Why electricity is the only alternative fuel that can lead to energy independence“). But the per-mile cost of driving on electricity is already one-fifth that of the per-mile cost of driving on gasoline.

So the key to ending our oil addiction in a climate-friendly way is not increasing the price of carbon through a cap. The key is much tougher fuel economy standards along with incentives and mandates for plug in hybrids and electric cars. [And, yes, pushing hard on cellulosic biofuels, especially for long-distance driving, trucking, and air travel, would also help (see “Are biofuels a core climate solution?“).]

A helpful analysis that puts things into perspective. One comment: I’m not sure we can apply the European experience to us here at face value. It’s true that gas at $8/gal has resulted in only 37 mpg average there, but distances are considerably greater here. Wouldn’t one expect increases in gasoline costs to have a greater effect, given the greater distances and correspondingly greater cost increase? Ok, it may not be what we need, but if it’s 45 mpg, say, then that does change the equation a bit.

Probably, this is all counting angels because what is the chance of getting a gas tax of several dollars? But if we did, it would produce a lot of revenue to be used in programs to reduce carbon emissions, which is why I would push a higher gas tax at every opportunity.

Could you in a following post explain why a cap and trade policy shouldn’t involve the transportation sector? I understand your point about it having much effect on gas prices, but it would bring in a lot of revenue to the cap and trade “tax”, which could be spent elsewhere.

Secondly, could you post what your “ideal” cap and trade bill would look like (your choice if you think it would pass or not), or put up some thoughts and open it up for discussion? If this already exists, sorry, I looked and couldn’t find it.

@ Alex:
I think Joe’s response would be that collecting a carbon tax and using government revenue, whatever its source, to subsidize alternatives are two separate events. If you want to provide public incentives for this, it’s best to focus on that by itself, without reference to specially dedicating the revenue from some particular source.

Now, Joe and others have moved away from the carbon-regulation emphasis to an emphasis on eliminating coal w/o CCS from the energy mix. But a carbon tax tends to implicitly leave the status quo in place, only now taxing it.

So what’s called for is to use regulation and incentives to do away with so-called dirty coal and encourage renewable energy and high-efficiency vehicles.
This would accomplish the twin goals of reducing emissions and getting the oil monkey off our backs.

“But I think it is more likely that they all understand something I’ve written about on my blog many times — a carbon price is a lousy way to drive oil savings.”

I agree that a cap-and-trade program is not the best way to change our oil consumption levels, especially in personal transportation. However this sentence and some of the rhetoric in this article makes it sound like a carbon TAX (different idea) would also be ineffective. This might have just been an error, or maybe I am missing a key flaw in a carbon tax, but it seems to me that one of the major problems with American vehicles are the SUV’s and light trucks that boast of 18-20 mpg (if they are lucky) and bring the overall average down. I would think that if there were a substantial carbon tax on the tonnage of CO2 involved in the building, selling, and operation of a given vehicle (take the H2 for example) that it would encourage people to avoid these sorts of gas guzzlers. Now you are adding a major cost ($1,000 a year, I don’t know) to the ownership of the vehicle AND bringing demand down which would theoretically have a small impact on the increasing price of oil.

A cap alone will not cure all ills, but it goes a long way towards solving the problem. Let’s look at the numbers.

MIT’s analysis of the Climate Security Act says that net crude oil imports would be 22% lower by 2015 under CSA than without. These savings rise to 31% by 2020, 41% by 2025, and 66% by 2030! (Savings decrease in the next years due to some modeling assumptions around other countries taking on caps, but are up to 62% again by 2050.) Sure, that’s technically not “solving the problem” entirely. However, solving two thirds of it isn’t all that bad in my book.

But that’s not all. As you rightly state, rising prices alone aren’t going to solve the transport issue: 97% of our vehicles run on oil. Changing that requires more than increasing the price, as your examples from Europe and many economic studies show. That’s where additional direct mandates like higher CAFE standards come in, much like as you suggest. It’s also where the cap can show its full potential. Depending on how many of the carbon allowances are auctioned (as opposed to given away for free), a cap will also generate large sums of money. Part of that could be used to jump-start our transition to a greener transportation sector that’s less dependent on fossil fuels. It’s tough to put a number on this. Yet it wouldn’t be too surprising if a combination of these measures could take care of the remaining third of the problem.

These arguments also show why the ad competition is a good idea. It’s tough to translate economic modeling results into an accessible language without sounding overly wonkish, let alone describing the potentials for these additional measures.